Since this is your first auxiliary conference I hope you find it valuable as you learn your way around the California State University.

This is my 10th year speaking before this group, so I thought I would start by talking about the number 10.

Now that David Letterman has made a deal with the striking writers and brought back his late night show and his famous Top 10 lists, I thought you would want to hear my Top 10 reasons why you should attend AOA conferences:

Number 10 – Only at an AOA conference does today’s first speaker use the art of magic and power of mind to make you use your mind.

Number 9 – No other meeting has a session on “how to implement your ethics program in a humane and civil manner that will overcome fears…” – what does that mean?

Number 8 – Where else can you find a group that thinks networking is a code word for a martini with 3 olives?

Number 7 – Because most people think AOA stands for “Always Outstanding Affairs (or Adventures)”

Number 6 –It’s more understandable than the Iowa caucuses.

Number 5 –You can learn where the real money is in the CSU. Ask the CFA.

Number 4 – It’s better to be here than at another CABO meeting.

Number 3 – Leon Panetta will tell you what really goes on in the White House.

Number 2 – The golf course is only a few yards away.

And the Number 1 reason to attend an AOA conference – Because you get to hear this Top 10 list before David Letterman steals it.

In reality, there are many valid reasons to attend these meetings.

One is for all of us to review what has happened in the past year, and then look to the future for the California State University and our auxiliary organizations.

This past year has been good as well as challenging for the CSU.

We began our academic year with higher enrollments than ever before – nearly 450,000 students, and nearly 56 percent students of color.

That is a major achievement, and there is no other university system that can match us with those numbers. We are the workforce backbone of California.

Outreach

We have had good outreach efforts to our underserved communities.

Next month we will again participate in two “Super Sunday” events with the African-American churches in the LA and Bay areas. We will reach out to families and their children to help them get ready for college. We will reach 45,000 people in those two weekends.

We are also working with Latino families, and all our campuses are involved in getting our returning veterans to enroll and succeed in college.

We cannot let up in our outreach efforts because they will translate to a better-educated California. I do worry about our pending budget cuts, however.

Californians have high regard for the California State University as we learned in the recent higher education survey completed by the Public Policy Institute of California.

They found that 66 percent of residents thought the CSU was doing an excellent or very good job.

That is the good news. (Legislators only received a 26 percent positive rating for their handling of higher education issues.)

The downside was that people are still very concerned about college costs and most people have not saved enough for their children’s educations.

We need to continue to work hard to show Californians that the CSU is still very affordable and that a college degree will mean at least a million dollars more in income than just a high school degree.

Word of mouth is very important in this effort, so I hope you will all continue to be ambassadors for the CSU.

Our students also continue to contribute to this state through their community service and community engagement activities, many of which are tied to your auxiliaries.

I am very proud that nearly half of our 450,000 students perform some kind of service annually that is worth millions of dollars to non-profits, businesses, schools, homeless centers.

Our students are part of the Public Good – they are part of the Accountability report. They provide more than 30 million hours of service annually.

Challenges

Challenges have come this year in the form of some audits and legal judgments against the system, but we are confident that we can and will move forward from these events. You always learn something to make things better the next time.

Our big problem is the state budget.

The state is facing a $14 billion deficit and the Governor has proposed to resolve this deficit by bringing spending under control.

In an effort to address only the spending side of the budget the Governor proposed a mid-year budget reduction of 10 percent, of which the CSU is currently exempt.

However, he also proposed an across-the-board budget reduction of 10 percent in 2008-09 that represents a decrease of $312.9 million to the CSU budget.

Five of the 10 years I have been with the CSU I have had to deal with state budget reductions.

Between 2002-03 and 2004-05 the CSU suffered $522 million in decreased General Fund support.

During the last three years, we have had a Compact with the Governor.

It has provided campuses with the fiscal stability to fund added enrollment growth, compensation, and mandatory costs for health benefits, energy, and new space.

That will not happen this coming year.

Three years worth of budget reductions earlier this decade resulted in decreased funding from the state to support nearly 13,000 students, no funding for any compensation agreements, and campuses having to cut non-instructional areas of their budget to find the money to pay for their mandatory costs.

I said on a radio program a few weeks ago that the way California's budget is going we could have world-class prisons and second-class universities.

We cannot allow that to happen - we all have to work to convince Sacramento that properly funding the CSU means a better educated workforce that boosts the economic output of this state.

A $312.9 million cut to the CSU budget will mean no funding to support any additional enrollment growth and denying 10,000 students a chance to enroll in the CSU in 2008-09.

We will close admission at our campuses on February 1, the earliest ever.

That is a travesty for those students who have worked so hard to be admitted to the CSU.

It is particularly disheartening for those underserved students we have worked hard to bring to our campuses.

This budget reduction will mean faculty and staff who were denied raises earlier this decade will not receive the funding to support a 3 percent compensation pool.

We also will not receive the resources designated by our Board of Trustees to address long-standing salary lags.

Finally, campuses will once again need to find approximately $36 million in their budgets to cover their mandatory costs in the coming fiscal year.

This is not the situation we want to be in.

It is not good for students or employees, or the state, which relies on the CSU for graduates who contribute so much to our state’s economy.

Richard will be addressing you tomorrow morning so he can be more specific about where we are at this point, and where we hope to be later this year when the budget is finalized.

10 years ago

For those who remember, when I spoke to you in 1999 it was the first time a CSU Chancellor had spoken to your group.

I said then that I hoped that would signal “the start of new and improved communications between the auxiliary organizations and the CSU system.”

I also talked about the need to put students first and to constantly ask ourselves “What can we do to serve students better?” I have never deviated from that question, and neither should any of us.

What most of you remember were the harsh statements I made such as:

The mission of the auxiliaries often was not aligned with the CSU mission – there was a disconnect

The biggest risk to the CSU at the time were our auxiliaries and foundations

There was little public accountability

Some investments had no connection to our educational mission, such as out-of-state real estate investments

Many auxiliaries were not part of the CSU team – there was too much autonomy – it was an “I’m on my own” attitude

And presidents did not always know where all the resources were invested or budgeted.

I stunned everyone into silence that night, and looking back, that was a good thing. We all need things like that to happen once in a while.

What I have found in each of the following years is that there are improvements in your operations, and there is more transparency and more accountability.

So let me really start tonight by telling you that you are doing good work, your missions are much more aligned with the overall CSU mission, and you are thinking about students first.

That is all positive, and if you take anything away from this conversation tonight, let it be said that we are a better team than we were before.

When I came to the CSU there were about 70 auxiliaries, and now there are about 90 - an increase of nearly 30 percent.

The first auxiliary was the Fresno State College Association, which was established in 1922. Student associations have been around at a half-dozen campuses since the 1920s.

Many of you might know this, but for those who tend to work only in their specific areas or are new to the CSU, our auxiliaries basically fall into five wide-ranging categories:

Student Body Organizations: such as associated students operations, student newspapers, recreation, and cultural programs. Fees come from the students.

Sponsored Programs and Special Education Projects: Faculty sponsored research. This funding comes from federal, state and private grants and contracts.

Student Unions: These student-collected fees are for the bonds used for construction of the facilities, with any surplus funds used for their programs and operations.

Commercial Services: campus bookstores, food and vending services and agricultural projects. Revenue is used to sustain these programs.

Specialized Support: these include student and employee housing, parking, insurance, property development, foundations that seek private/corporate support and radio/TV stations.

As you can tell, auxiliaries are a varied lot, which is why we need to pay particular attention to what you do to make sure you stay true to the CSU mission.

We have not experienced the financial downturns in the auxiliaries like we have with state funding.

Our foundations have continued to raise funds, and while maybe they have not increased as much as we would like, we have not suffered significant decreases.

Last week Dan Walters in the Sacramento Bee talked about how much pressure I put on our presidents to raise money…like the UC…as if that were a bad thing.

Your organizations give us the stability for the future because you allow us to do what we cannot do through the state side of the house.

That capability is an enhancement for the CSU that other state agencies do not have.

Which again is why it is important to be transparent so we are able to maintain that flexibility and stability and be accountable to the state.

We have to have the confidence of the public.

That is also why we are scrupulous about complying with the Legislature’s and Board of Trustees’ rules, regulations, and internal and external audits.

Thank you for your attention and cooperation with these audits. KPMG continues to certify your audits as well as our financial statements.

I have said it before and it bears repeating – the public does not know the difference between the CSU and the auxiliaries. To the average person, we are one and the same.

So that if you do well, the CSU does well.

If you do poorly, the CSU does poorly in the eyes of the public and in the press.

Therefore, it is in both of our interests and in the interests of our students that we all set standards and then meet those standards, both fiscally and ethically.

Recent Progress

I want to talk about some successes this year, and much of that is because we have stayed in the team mode.

Like a good football team, both the defense and the offense work together, even though they are not on the field at the same time. They both know the game plan and where they want to end up – in the “W” column.

Same with the CSU and your auxiliary organizations. For example:

The Systemwide Revenue Bond program is working very well. We have refinanced a considerable amount of auxiliary debt, which has saved a substantial sum of money - $35 million. By combining CSU funds and auxiliary funds, we have been able to leverage the fiscal strength of the entire CSU. This is a progressive approach to capital financing of campus projects, particularly those needing auxiliary organization involvement.

The Auxiliaries and the Chancellor’s Office have also worked together to improve auxiliary organization compliance reviews, an important accountability measure. Previous efforts have been somewhat scattered, but there is now a high level of management professionalism in your organizations that means more attention to these details.

The CSU and the AOA teamed up on the Textbook Affordability Act. It is crucial that we help our students when it comes to the cost of textbooks.

We have also worked together by seeking review by the AOA of some Executive Orders (such as those concerning trust accounts, financial management of self-support programs and fee policy review) pertinent to your organization. Several of you have helped with that, and I thank you.

A taskforce formed a few years ago on endowments has resulted in our hiring an investment firm (Citi-SmithBarney) in 2007 to provide advice on campus endowments. While campuses are not required to use the firm, it is always wise to seek advice from experts as we work to increase our endowments, which are quite low in most cases. The better we increase our endowments, the better we serve our students.

To keep our CSU Trustees informed on our auxiliaries, we will have a report at the March BOT meeting to bring them up to date on many of the programs and policies. Our trustees are responsible for overseeing the CSU’s fiscal health, so this will be a valuable report for them.

More good news:

We will also continue to appoint task forces to study issues of relevance to the auxiliaries. Bringing together talented campus and system people to work on common issues for the benefit of all is another example of good teamwork.

One hundred (100) percent of your organizations have joined as members of the CSU Risk Management Authority. This will enable all of us to continue to develop strategies that streamline and integrate the risk management practices of the CSU system. Again, a good example of teamwork.

Finally, our risk pool rates have gone down, and our workers’ comp costs have gone down. The reason is that we have implemented good loss-control and loss-prevention plans. We used to pay about $29 million per year four years ago, and we are at about $20 million now. In fact, we previously returned about $15 million to the campuses ($2 million to the auxiliaries) because we have gotten better at these prevention plans. We will return another $7 million to the campuses, and $1.2 million to the auxiliaries. Risk Manager Charlene Minnick gets an “atta girl” for all her work in this area.

Summary

As I look back on the last 10 years, I see a lot of progress bringing all the CSU entities into one family.

Like issues with most families, there have been a few rough spots, but there definitely have been more good results.

As long as we are moving forward for the good of the students, then we are doing our best.

I want to thank you for what you have done for the California State University this past year. I hope this conference inspires you all to continue on that path of greater teamwork.

If you get better, we all get better. I hope that next year if you ask me to speak again I will be able to talk about more cooperation and collaboration.

And maybe I can come up with 10 more reasons to attend one of these conferences. I welcome your suggestions on next year’s list.